(Corrects last paragraph of Aug. 8 story to show
TeliaSonera owns 60.3 percent of LMT.)

Aug. 9 (Bloomberg) -- Latvia’s government is considering
merging the country’s largest fixed-line and mobile phone
companies or taking other steps to boost their value and cut
costs, the Economy Ministry said today.

Following a report in magazine Ir that it had proposed
combining partly state-owned fixed-line operator SIA Lattelecom
and mobile company Latvijas Mobilais Telefons SIA by the end of
2014 before possibly selling them, the ministry said a group
working on the issue is not recommending an immediate sale.

Latvia’s government rejected a bid in 2007 by TeliaSonera
AB, Sweden’s biggest telephone company, to buy the stakes it
doesn’t own in the companies for 6.7 billion Swedish kronor ($1
billion). It also rejected a separate offer by the Blackstone
Group LP for Lattelecom a year later, a move that drew criticism
from former President Vaira Vike-Freiberga that Riga was
damaging its reputation for foreign investors.

“At the moment the privatization of the businesses is not
being discussed,” the Economy Ministry said in a statement on
its website today. It said a group comprised by officials from
the economy, finance and transport ministries was “evaluating a
number of future management models” that would ensure growth in
value, improve customer service and cut costs. It said one
possibility was a merger with the state retaining control.

Raising Value

The group of officials has sent a report to other
ministries, with the government making a final decision on how
to proceed, the Economy Ministry said. It did not give more
details on the report.

Ir said that the valuation of the two companies would rise
by 45 million lati ($85.6 million) after a merger, citing the
report. After the merger the government would consider selling
its stake to TeliaSonera, issue shares on the stock market, or
offloading a stake to an investment fund, Ir said.

TeliaSonera says it already owns 49 percent of Lattelecom
and through direct and indirect shareholdings has 60.3 percent
of LMT. It owns all of Estonia’s biggest fixed-line operator,
Elion, and largest mobile company, EMT, and has an 88.2 percent
stake in Lithuania’s AB TEO LT.